Is the Tesla Model 3 overhyped?

10 arguments for and against Tesla's entry-level model.

08 April 2016David McCowen

Tesla's Model 3 received a warm reception around the globe. Photo: AP

COMMENT

Tesla broke the internet last week by revealing a more affordable electric car that could change driving forever. More than 250,000 people around the world ? including hundreds of Australians ? paid deposits for the new Model 3. Here's why it could be a game-changer... and why world-beating claims require dash of perspective.

Why it will be a success:

Tesla builds great cars

The first pictures of the Tesla Model 3 were released on April 1. Photo: Supplied

By any objective measure, Tesla builds incredible cars. The electric models are among the safest on the road, the fastest in their class and the most economical to run.

The Model S has won plenty of accolades ? including Drive's Car of the Year award for the Best Luxury Car over $80,000 ? impressing customers and critics around the world.

Tesla's combination of suave design, electric performance and green innovation results in a cool factor few machines can match. The Model X SUV will build on that when it arrives later this year, paving the way for the mainstream Model 3 in the near future.

Tesla customers in Australia queued to buy the new Model 3. Photo: Supplied

Electricity is the future

As a company dealing only in electric cars, Tesla has become a pin-up for the battery movement. It wasn't the first company to offer an electric car, and there are plenty of rival machines on the way from mainstream manufacturers such as Toyota and Volkswagen and premium brands like Mercedes-Benz and Porsche. The car industry is investing billions of dollars into battery development as emissions regulations become increasingly strict and battery tech improves.

Electric cars look likely to be more successful than petrol, diesel or fuel cell-powered machines in the long run. Tesla is onto a good thing.

Tesla invests in infrastructure

Infrastructure could be the most important factor in Tesla's path to success. The company has invested its own money into an electrical charging network while rival manufacturers lobby governments for publicly-funded points. Tesla's fledgling Supercharger network already allows drivers to travel from Melbourne to Brisbane without paying for any electricity, giving its customers quick and convenient access to electric energy. The brand also offers "destination charging" at hotels and other businesses that will top up its cars at no cost to customers.

The Supercharger network is far more established in the US, and Tesla chief executive Elon Musk says there are plans to double it by the end of next year.

Tesla is a brand on the rise

Tesla has taken the automotive world by surprise in recent years, becoming the fastest-growing luxury brand on sale. The company sold more than 50,000 examples of its Model S in 2015, a number that will climb dramatically as the marque shifts from a single-car to a three-car line-up.

The manufacturer holds more than 250,000 deposits for the Model 3, the majority of which will go to US customers. That's an astounding number considering that BMW's 346,000 annual sales make it the most popular luxury brand in the US.

Growth has been slower in Australia, thanks in part to a lack of government incentives and a lack of charging infrastructure. Tesla doesn't publish local sales numbers, though NSW Roads and Maritime Services data reveals that there were 65 Tesla vehicles registered in the state at the end of 2014, a number that grew to 300 over the next 12 months. The brand says more than 200 people paid Model 3 deposits on the first day it could be ordered, and plenty of people are likely to have ordered the Model X SUV.

Why you should be cautious:

We haven't seen the production version

The car unveiled on Friday doesn't necessarily represent what will be offered to customers. Tesla has been short on details for the model, outlining loose characteristics such as a 0-100km/h time of less than six seconds, a range of around 350 kilometres and hardware capable of handling the brand's self-driving "autopilot" features. If Tesla followed automotive convention, last week's model would be a concept car giving a close look at the future production model. We don't know exactly what sort of battery or motors the Model 3 will use, exactly how much it will cost or exactly when it will arrive.

Musk says more will be revealed closer to the car's production debut.

Tesla is not a profitable business

Tesla does not make money. The company's latest financial reports, which take in the three months to December 31, represent 11 consecutive quarters of loss.

The LA Times reports that Tesla had "less than $1.2 million cash on hand when Musk was projecting $1.5 billion in capital expenditures on the horizon" late last year. The brand reportedly loses thousands of dollars on every car it builds.

Mercedes-Benz research and development chief Thomas Weber told Drive in March that Tesla is "definitely not" the leader in electric cars, and not a major threat to established brands.

"They did one really great vehicle. Tesla changed this business a lot," Weber says.

"But still they don't earn money, still their volumes are small."

Tesla hasn't sold 250,000 cars

No one has bought a Model 3, they've simply paid for a place in the queue.

While Musk says the Model 3's launch represented "$7.5B in a day", the reality is that the scores of customers who put their name down for a car may not be completely committed to it. The brand's $US 1000 deposits in the States ($1500 locally) are completely refundable, and many buyers have taken a speculative approach to the car. Sydney customer Amir Marashian told Drive that the $1500 deposit represented "very little risk", and that he wasn't sure whether to buy and drive the model as his own car.

Tesla is new to mass production

Tesla's chief says the Model 3 is the final piece in a master plan to make electric cars a reality for everyday buyers. The brand anticipates a five-fold increase in production in the next three years, prompting Musk to tweet that Tesla needs to "rethink production planning".

That's unlikely to be a painless process. The brand already has quality issues ? the Model X crossover has been delayed by the complexity of its "falcon wing" roof-hinged doors and oversized windscreen, while the existing Model S sedan has a patchy reliability record. A Tesla bought for long-term evaluation by US website Edmunds.com required two driveline replacements in its first year on the road, while Consumer Reports lists the Model S in the "worst of the worst" section of its "Used Cars to Avoid" guide. Locally, customers are protected by an eight-year, infinite-mile battery and drive unit warranty protecting them from paying for failed components. It's difficult to see quality improving as a young company dramatically increases production.

It's not a cheap car

Tesla promotes the Model 3 as having a $US35,000 "starting price before incentives" in the US, where Government cashback programs and other promotions for electric cars have helped Tesla gain traction. Those aren't available in Australia, where buyers won't benefit from handouts intended to encourage the take-up of green vehicles.

That said, Tesla's US customer base will lose some of its discounts soon. A $7500 Federal tax credit offered to US Tesla customers only applies for the first 200,000 vehicles built by the manufacturer ? five years of Model S and Model X production will soak up plenty of that.

Tesla also says that initial build slots for the Model 3 will be reserved for more profitable, highly-optioned variants set to cost well more than the base vehicle. Given that the Model S sedan currently ranges from $138,111 to just under $280,000 in NSW, the estimated $65,000 entry point for the Australian Model 3 range is likely to be much higher when initial deliveries arrive.

We were a little puzzled when Tesla customers started queuing outside stores to put a deposit on the Model 3, particularly as the company is famous for a web-centric sales structure that shuns traditional dealership models. However, those who did get in early to put their name down for a Model 3 were clever to do so. Tesla says Model 3 deliveries will start in late 2017, but it missed its American Model X delivery timeline by 18 months, so that date should be seen as guide rather than gospel. Australian customers will wait even longer ? remember that the first Tesla Model S deliveries in the US took place mid-2012, well before Australian examples landed towards the end of 2014.

Australian brand representatives suggest that left-hand-drive customers in the US will again be the first priority, with Australian right-hand-drive examples to follow some time in 2018 ? dates that probably represent a best-case scenario. Given that hundreds of local customers have already placed deposits for the Model 3, it's possible that people ordering cars now will not receive new models until at least 2020.

So, what's the hype factor?

Tesla is one of the most exciting companies in the world. It has shattered expectations in recent years and redefined elements of the car market. But the Model 3 poses serious challenges that could make or break a young company. The new car promises to be an important model, though some reactions to its debut seem more than a little overblown. Whatever happens, the the road ahead will be an interesting one.

- with wire services

Drive Comments

0 Comments

Facebook Comments

Share

Width

Profile

Rim

The size of your tyre is located on the sidewall of your tyre.It will be similar to the sample below.